Lesson 3:Long-Term Liabilities Assignments Problem1 For each of the below situat

Question

Lesson 3:Long-Term Liabilities Assignments Problem1 For each of the below situations, determine the bonds' issue January 1 and prepare the journal entry to record issuance. The company iss on June 30 and December 31. The bonds have a 40,000 par val annual contract rate of 10%, and mature in 10 years. price on ues bonds dated January 1, that pay interest semiannually The market rate at date of issuance is 6% A-Determine the price in the below table Cash Flow Table Table ValueAmount Present Value B.1 Par value Interest (annuity) Price of bonds Bond premium B.3 B. prepare the journal entry for issuance Jan. 1 Themarket rate at date of issuance is 10% A-Determine the price in the below table Cash Flow Table Table Value Amount Present Value B.1 Par value Interest (annuity) B.3 Price of bonds

Explanation / Answer

A PRICE of Bond = Present value of sum of interest payment in future + PV of redemptioon amount i= 6%/2= 3% n = 10 years*2 = 20 periods half yearly interest 40000*5% = 2000 PVF Amount Present Value PAR Value 0.553676 40000 22147.03 Interest(Annuity) 14.87747 2000 29754.95 Price of Bond 51901.98 BondPremium (51901-40000) 11901.98 Dr.($) Cr.($) Bank A/c Dr                        51,901.98 To Bond 40000 To Premium on issue of Bonds 11901.98 (Being Bonds issued) IF MARKET RATE IS10% PRICE of Bond = Present value of sum of interest payment in future + PV of redemptioon amount i= 10%/2= 5% n = 10 years*2 = 20 periods half yearly interest 40000*5% = 2000 PVF Amount Present Value PAR Value 0.376889 40000 15075.58 Interest(Annuity) 12.46221 2000 24924.42 Price of Bond 40000 BondPremium (40000-40000) 0 Dr.($) Cr.($) Bank A/c Dr                        40,000.00 To Bond 40000 (Being Bonds issued)

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